Analysis of case study Netflix is a platform that allows users to watch TV

shows, movies, cartoons and much more on their

devices. There is a monthly subscription to access
the service, which offers content from various
sources, but also original content produced by

in 2011 Netflix. Available in more than 190 countries, with

more than 200 million subscribers worldwide,
Netflix is known for its user-friendly interface and
Damjan Radusinovic
personalized recommendations that provides
MIU City University Miami
MBA 550: Operations and Service Management endless entertaining content for its customers.
February, 2023
The beginnings

Founded in 1997 by Reed Hastings and Marc Randolph Netflix was a DVD rental service that was sent via mail. At the same time, it
had an online DVD rental store, where by browsing the website users could pick a movie from a catalog and have it delivered by mail.

In the beginning 2000s, Netflix launched a different kind of model that allowed renting DVDs for a fixed monthly fee. The approach
that Netflix gained popularity among users and became a total hit since most video rental stores used a model where each rent would
get charged.

A couple of years later, Netflix announced its online streaming website, which provided a library of movies and series that could be
watched online. This way users didn't have to wait for their movie in the mailbox. This way Netflix provided a more affordable and
convenient approach for users.

Online streaming was very popular among customers, and allowed Netflix to invest in a massively expanding library and improving
streaming technology. At one point, Netflix became a production house, making its original content.
Netflix Business Model

Netflix's decision to divide its business in two was risky, but it was an opportunity that allowed them to completely change the
perspective of its product and grow in a new direction. This is a great example of the importance of innovation adaptation and listening
to customers' needs, and how it changed the whole media market. It was very challenging to do this, as they needed to rise content
costs, balance growth with profitability, and educate customers that are not aware of new technologies.

The transmission to full online service was slow and gradual. Their customers still had an opportunity to rent if they preferred, and
online libraries became diverse and enriched through time, with a more user-friendly and technically better platform.

As a pioneer in online streaming, Netflix had a major advantage over the competition. Another thing is that Netflix had a developed
algorithm that could personalize recommendations based on analytics of users' data. This adaptation was one of the most crucial
benefits of their product.
Operational perspective
Netflix VS Blockbuster strategy

Netflix and Blockbuster's business strategies differed in customer experience and overall approach to technology. While Netflix's
strategy was focused on modern technology and providing personalized recommendations and convenient service, Blockbuster was
relying heavily on its physical stores and DVD rentals.

Netflix's switch from rental provided them much more customers and an opportunity to expand globally. While Blockbuster did
eventually offer an online DVD rental service, the company was slower to embrace streaming technology and the shift to digital media.
Occupancy and payroll (part-time employees) were the significant cost for each retail location employing. Customers liked to rent
mostly new releases in the first week of distribution and after that demand fell. As demand for a particular title dropped, Blockbuster
would sell the used copy to reduce their inventory and buy new releases.

In the end, Netflix's strategy was more popular among users and made them a number-one pick in online service media streaming.
Blockbuster, on the other hand, failed to adapt quickly enough and filed for bankruptcy in 2010.
Netflix’s current challenges

● Increasing competition: As the streaming video market is rapidly growing, more and more competitors are entering the market
(Amazon Prime Video, Disney+, and HBO Max). This has put huge pressure on Netflix to continue to innovate and offer new
deals.
● Content costs: As more companies compete for popular shows and movies, the price of content has risen. This has put
pressure on Netflix's profitability and could lead to a need for higher subscription prices which could cause a future problem.
● Retaining subscribers: With so many options available, Netflix needs to keep subscribers engaged and prevent them from
switching to competitors. This requires continued investment in high-quality original programming, as well as ongoing
improvements to the customer experience.
● International expansion: While Netflix has seen significant success globally, there are still challenges around expanding into new
markets and localizing content for diverse audiences. This requires a significant investment in internationalization and cultural
sensitivity. Netflix is handling this challenge quite well (Netflix even produced a tv show in my country for a local audience in
Serbia called Nečista krv).
Operations management solutions
Data and analytics: Netflix can continue to leverage its data and algorithms to better understand its customer and their wishes. This
can help the company make better decisions around content acquisition and production, as well as optimize its pricing and
subscription models.

Supply chain optimization: To address rising content costs, Netflix can look to optimize its supply chain and production processes to
reduce expenses. This could involve negotiating better licensing deals with studios and distributors.

Localization: To expand its international reach, Netflix can invest in localization efforts to better tailor its content to local audiences.
This could involve hiring local talent, producing region-specific content, and adapting its user experience to accommodate different
languages and cultural norms. Netflix collaborated with one of the most successful local directors in Serbia called Dragan Bjelogrlic to
make content suited for local audiences.

Partnerships and collaborations: To stay ahead of the competition, Netflix can look to form partnerships and collaborations with other
companies in the media. This could help the company access new markets and technologies, as well as share expertise and resources.
Netflix’s value chain change

1. Content Acquisition: The acquisition of content became a critical part of Netflix's value chain. To create value for
streaming service, Netflix needed to secure a diverse library of content that would attract and retain subscribers. To do
this, Netflix invested in data analytics and algorithms to better understand what content its subscribers wanted to watch,
and it also began producing its original content. Netflix needs to keep investing in data analysis due to the fact that it will
provide them with a clear insight into customer needs.

2. Content Distribution: Streaming required a reliable content distribution network to ensure that users could access
content quickly and seamlessly. To create value in this area, Netflix needs to keep, but also improve content delivery and
technical performance, as well as partner with internet service providers to ensure reliable connectivity.
 Netflix’s value chain change

3. User Experience: When Netflix switched to providing streaming services, the user experience became the critical part of
value chain. Netflix needed to ensure that its service was easy to use, personalized, and delivered high-quality content. To do
this, Netflix invested in a range of operational measures, including the development of user-friendly interfaces, personalization
algorithms, and advanced video streaming technology.

4. Customer Service: With the change to streaming, Netflix's customer service needs also changed. To create value for its
streaming service, Netflix needed to provide high-quality customer service that was attentive and responsive to the needs of its
customers. To do this, Netflix invested in a range of operational measures, including the development of customer service tools,
and data analytics to understand and address customer needs with more efficiency.

Overall, the change to streaming required significant changes to Netflix's value chain and operational capabilities. By investing in data
analytics, content production, content distribution, user experience, and customer service, Netflix was able to create value for its
streaming service and become a dominant player in the video streaming market.
Conclusion

Netflix is a successful company with a huge audience that is still growing. Also, it is facing challenges that can affect its success in the future.

One of the biggest challenges is that Netflix does not operate longer in the Blue market. The streaming market became, overly crowded in the
past few years, introducing new players such as Disney+, Apple TV+, and Amazon Prime Video giving customers various options Due to this, Netflix
is under huge pressure to produce high-quality content and differentiate itself from the competition.

This has led to the price increase for original content due to the high competence of service providers. With this Netflix needs to find a way to
keep low monthly subscriptions in order to retain the audience.

Netflix needs to remain cautious and adapt to the new changes in the market so it doesn’t lose its competitive edge.

Netflix is still one of the main players in the streaming market with a successful and profitable business model. Its business shift from 2011 was
crucial for its market launching, the change was original but risky. Netflix needs to keep an open mind and stay agile for new big changes in the
game.
References

● Gomez-Uribe, C. A., & Hunt, N. T. (2015). The Netflix Recommender System: Algorithms, Business Value, and Innovation, 6(4),
https://doi.org/10.1145/2843948
● BBC News. (2018, January 23). Netflix’s history: From DVD rentals to streaming success.
https://bbc.com/news/newsbeat-42788099
● Team, I. (2022, October 1). How Netflix Is Changing the TV Industry. Investopedia.
https://www.investopedia.com/articles/investing/060815/how-netflix-changing-tv-industry.asp
● Successes and Failures. (n.d.). Blockbuster Vs. Netflix. https://blockbustervsnetflix.weebly.com/successes-and-failures.html
● Towey, H. (2022, April 30). Netflix is in crisis. Hollywood insiders say it could turn into a huge opportunity or leave executives
“more scared and paralyzed than they already were.” Business Insider.
https://www.businessinsider.com/netflix-subscriber-drop-layoffs-content-opportunity-or-crisis-2022-4